Carl Owns Stock in XYZ, Which Has Dropped by 20

question 19

Multiple Choice

Carl owns stock in XYZ, which has dropped by 20% over the last month. Carl decides to purchase additional shares of XYZ. Which bias is most consistent with Carl's decision?

• A) Representativeness
• B) Overconfidence
• C) Naïve diversification
• D) Status quo bias

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Definitions:

LIFO method

Last In, First Out; an inventory valuation method where the most recently produced or purchased items are the first to be expensed.

Periodic system

An inventory valuation method where updates to inventory records are made on a periodic basis, usually at the end of an accounting period.

Beginning inventory

The value of a company's inventory at the start of an accounting period.

Perpetual inventory system

An inventory system that keeps continuous, real-time records of goods bought and sold, updating inventory accounts without physical counts.